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Home » Eastern European Supply Chains Back in the Spotlight

Eastern European Supply Chains Back in the Spotlight

February 8, 2011
SupplyChainBrain

Analyst Insight: Now that the Eastern European economies have exited the recession (as indicated by recent GDP growth trends), these markets are once again drawing increased interest from investors. And as the region's economies are coming back into spotlight, so are the local supply chains. With such sectors as retail, consumer goods, agribusiness, logistics/distribution and manufacturing among those attracting the most investor attention, supply chain excellence is bound to play a critical role in propelling these economies forward.

--Viktoriya Sadlovska, managing director of Prameya Research

The Eastern European market comprises economies different in size, structure and infrastructure development levels. Hence, supply chain capabilities and management techniques differ significantly throughout the region. In most Eastern European countries, much investment is still needed in the supply chain and distribution infrastructure. However, the differences across countries are significant. While nations like Poland, Hungary, Czech Republic, Slovakia and others have been making large investments in their infrastructure and moving quickly towards meeting the EU standards in supply chain management, their Eastern neighbors (Russia, Ukraine, et al.) are still lagging behind in both logistics infrastructure and SCM expertise development.

There are multiple logistics and distribution challenges for companies trying to compete in countries like Russia, Ukraine, Belarus or Moldova. These include the lack of reliable supply chain infrastructure (roads, rail, distribution center and warehouse facilities, etc.), the lack of logistics management knowledge and strategic approach to SCM, complex regulatory environments, etc. These challenges are fueling the demand for specialized third-party logistics services in the region. Besides the core SCM expertise, such outsourced providers are also likely to have better insight into how to navigate the peculiarities of the often confusing local regulations.

Today, most local companies in countries like Russia, Ukraine, Belarus or Moldova do not have an integrated view of SCM and tend to view its functions in silos. Manufacturers, distributors and retailers operating in these markets can reap significant competitive benefits by taking an integrated view of SCM and investing into building supply chain excellence internally.

There are sizable opportunities for development not only in regional supply chain infrastructure and knowledge, but also in enabling software and automation technologies throughout the value chain. A growing number of local software firms are offering SCM solutions, and global software players like Oracle, SAP and JDA have already established regional presence. Local branches or suppliers of multinational companies are driving increased awareness of the benefits of SCM software solutions, as these are often mandated by the global parent or partner company.

Over the next decade, supply chain infrastructure, SCM techniques and knowledge, as well as the market for supporting SCM products, software and services in Eastern Europe are poised for strong growth. Companies that have a long-term vision of having a presence in this region should invest in their local supply chain capabilities today.

The Outlook

There is significant room for development in Eastern European supply chain infrastructure -- the entire value chain in countries like Russia, Ukraine, Belarus or Moldova requires modernization. But almost as important as infrastructure development is the development of SCM knowledge and human resources. Companies that want to succeed in this market in the long term need to begin growing their locally relevant capabilities today, including adopting an integrated view of SCM and investing in knowledge development and automation.

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